The government is planning to implement Real Estate Regulation and Development Act (RERA Act) from May 1, 2017. Experts believe that the new law is expected to revive the real estate sector by bringing in a regulator for the sector, which till now was largely unregulated. The entire sector is set to gain from it and help attract buyers. Most of the experts advocate that RERA will bring in transparency and make for a conducive environment for fresh investments in the residential realty.
Although, the period after the nation-wide implementation of RERA will be ideal for any fresh investments, but investing even before that makes more sense as housing prices are expected to rise once RERA comes into force from the expected May 1 date. “Compliance-related price escalations are to be expected once RERA is implemented across the country, so the current time may be the best to buy as long as one picks one’s builder and project wisely, and negotiates a good deal,” Ashwinder Raj Singh, CEO – residential services, JLL India said.
According to real estate data, research and analytics firm PropEquity, housing sales have fallen marginally by 1 per cent in eight major cities to 28,131 units during January-March over the previous quarter, while housing prices have declined by 1.67 per cent to Rs 6,185 per sq ft from Rs 6,290 per sq ft during the period under review.
RERA no doubt benefits buyers/consumers but there are many experts who feel impact of the law on developers and its overall offering needs to be analysed vis-a-vis prices after the law is implemented.
Making a point for developers, Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP said the law that benefits all should not be misused by people to trouble developers for personal gains. “It would have been appropriate if government bodies were also made accountable for the delay in issuing clearances. On an average it takes 2-3 years to start a project after land is acquired; by this time the cost of land rises by 24-30 per cent due to hefty interest payments as bank loans are not available for procuring important raw material in this sector. The added cost ultimately gets passed on to the customer. These costs can be curtailed and passed on to the consumer if developers can start building faster and also deliver larger volumes quicker for the consumer, ” he added.
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Many developers and experts feel that RERA will bring in consolidation in the market, because of which only few player may exist and may not be good for consumers. “This is not good for market as prices for consumers are bound to increase with a decrease in competition. Competition already keeps prices in check and small developers who were able to offer that additional buck might cease to exist and buyers will have limited choices to choose out of, ” Unishire MD Pratik K. Mehta said.
Mehta also feels that provision of refund in 60 days is also unjustifiable as developers are not banks with liquidity. All the money is pumped into construction and in case of cancellations, there should be a re-allotment clause and not strict 60 day guideline for a refund as it will be impossible for developers to do so in such circumstances. In fact, with RERA, there will be strict monitoring of monies via escrow account and this refund timeline is not relevant. If several buyers seek to cancel at one go, it may jeopardise the entire project.
Mehta explains this further: “If there are 100 units sold in a project and out of 100, 40 buyers do not make payments on time and hence are subject to interest. But due to the delay from 40 buyers, the entire project gets affected and hence developer will have to compensate the other 60 buyers with interest and hence this is unjustified.